WSO2 surges ahead as market leaders in the open source software industry

By Cassandra Mascarenhas

Since its inception a mere five years ago, the lean enterprise middleware company WSO2 has grown from strength to strength and recently closed $6.5 million in growth financing, with the funding round led by computer software manufacturer Quest Software, Inc. and joined by existing investor Intel Capital.

These funds will be used to expand its global operation, grow its Silicon Valley-based marketing, sales and support teams; and extend its platform-as-a-service (PaaS) offerings to support the rapid increase in global demand for WSO2’s open source middleware platforms.

Quest Software and Intel Capital have financial returns objectives as well but their primary interest this investment is to get involved in the middleware industry and keep an eye on the future of the industry. As partners of the company, representatives from the two companies have also joined the WSO2 board as board observers.

“This is basically about expanding business — we want to get the company developed globally so most of the capital is going to be used for marketing activity and expansion and of course some R and D work as well. So we have about 125 people now and we are hoping to increase this to about 175 by the end of the year and we have just opened an office in Palo Alto, California and we will probably open another office in New York sometime within the course of this year as well,” explained the CEO of WSO2, Dr. Sanjiva Weerawarana.

The opening of their offices in Palo Alto, often said to be in the epicenter of innovation and entrepreneurship in Silicon Valley, just last month has allowed them to accommodate their increasing industry and Silicon Valley presence and expand their personnel. They plan to drive more of their North American marketing from this location, as well as expand their sales and support reach in this time zone. The company also hopes to increase their presence in Europe by opening an office sometime early next year.

Weerawarana stated that their business has grown almost double last year, as it has being doing for the past five years and that they expect WSO2 to do as well this year. In 2010, WSO2’s revenues grew 95% over 2009, and the rate of new customer acquisitions increased 175% in the same time period. Furthermore, more than 500 billion customer transactions per year now run through WSO2’s enterprise middleware — with one leading ecommerce site running up to 800 million messages per day through the WSO2 Enterprise Service Bus (WSO2 ESB).

WSO2 boasts a renewal rate of more than 90% among WSO2 Carbon production support customers and their growing customer base and revenues have enabled WSO2 to expand the company to more than 120 employees, representing an increase of over 30% in the last year and the company has further plans to increase their personnel to 175 employees by the end of 2011.

The company continues to compete with companies such as IBM and Oracle and they strive to offer a better product to their customers. However, with this comes the challenge for customers to trust a relatively new company and the $6.5 million in funding will go towards building up the WSO2 brand.

Recognition by institutions such as information technology research and advisory companies, Forrester and Gartner has gone a long way in building up their external recognition. Renowned as a leader in the industry, WSO2 is also the only open source company in the space and quite a small company to be the leader.

“What we are looking to do is compete with names like IBM, which is a consumer brand that everyone knows about. So anyone that works in the technology industry knows about IBM. So we too are trying to get to that point – where everyone knows WSO2. Our products may not get chosen all the time over theirs, but at least people will know that there is a choice when it comes to such products. So this investment is all about building the brand and of course that in turn generates business,” said the CEO.

The enterprise middleware company already possesses a number of high-end clients with brands such as e-bay, Deutsche Bank, British Airways, Microsoft, BBC, Hewlett-Packard, Mercedes-Benz and Prudential amongst many others currently deploying their software.

WSO2 has new release of software in the works which will come out sometime later this month which will have a whole lot of new features, as well as the release of a couple of new products. On the software side, their positioning is to offer a single middleware stack which covers the traditional on-premise deployment – basically buy a box and run the software yourself, to what is called a private cloud deployment as well as a public cloud deployment. This allows the customer to choose however they want to deploy the software and we cover the whole spectrum.

“It’s kind of our position and what we try to do is make that better and better and cover that space completely. So our software strategy has honestly not changed over the past five years; it is the strategy that the company was built on and that what we continue to follow but we are executing them with greater competence,” asserted Weerawarana.